Question

David deposited $500 at the end of every month into an RRSP for 8 years. The...

David deposited $500 at the end of every month into an RRSP for 8 years. The interest rate earned was 4.75% compounded semi-annually for the first 2 years and changed to 5.00% compounded monthly for the next 6 years. What was the accumulated value of the RRSP at the end of 8 years?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution :-

Interest rate for first 2 years = 4.75 % ( Compounded Semiannally )

Therefore Monthly interest rate = ( 1 + 0.0475 / 2 )1/6 - 1 = 1.00392 - 1 = 0.392%

Now Monthly interest rate after 2 years = 5.00% / 2 = 0.4167%

Now the Future Value of First two years deposit at the end of year 2 =

FV = P * [ (1 + r )n - 1 ] / r

FV = $500 * [ ( 1 + 0.00392 )24 - 1 ] / 0.00392

FV = $500 * 25.10697

FV = $12,553.49

FV of the Deposit of first 2 years at the end of year 6 = $12,553.49 * ( 1 + 0.004167 )4*12

= $12,553.49 * ( 1 + 0.004167 )6*12

= $12,553.49 * 1.349

= $16,865

Now Future Value of Deposit of year 2 - 8 at the end of Year 8

FV = P * [ (1 + r )n - 1 ] / r

FV = $500 * [ ( 1 + 0.004167 )72 - 1 ] / 0.004167

FV = $500 * 83.77

FV = $41,885.61

Therefore the Future Value at the end of Year 8 = $16,865 + $41,885.61 = $58,750.62

If there is any doubt please ask in comments

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Ali deposited $1,400 at the end of every month into an RRSP for 8 years. The...
Ali deposited $1,400 at the end of every month into an RRSP for 8 years. The interest rate earned was 4.75% compounded semi-annually for the first 4 years and changed to 5.00% compounded monthly for the next 4 years. What was the accumulated value of the RRSP at the end of 8 years?
Sophie deposited $1,300 at the end of every month into an RRSP for 9 years. The...
Sophie deposited $1,300 at the end of every month into an RRSP for 9 years. The interest rate earned was 4.50% compounded semi-annually for the first 3 years and changed to 4.75% compounded monthly for the next 6 years. What was the accumulated value of the RRSP at the end of 9 years? ( Pls give me solution too ) thank you <3
Ali invested $2,100 at the beginning of every 6 months in an RRSP for 11 years....
Ali invested $2,100 at the beginning of every 6 months in an RRSP for 11 years. For the first 5 years it earned interest at a rate of 3.50% compounded semi-annually and for the next 6 years it earned interest at a rate of 6.40% compounded semi-annually. a. Calculate the accumulated value of his investment at the end of the first 5 years. $63,900.39 $64,865.00 $22,733.34 $23,131.17 b. Calculate the accumulated value of her investment at the end of 11...
Deon makes monthly contributions of $250.00 at the end of every month into an RRSP. Calculate,...
Deon makes monthly contributions of $250.00 at the end of every month into an RRSP. Calculate, to the nearest month, how long it will take to grow to $100 000.00 if interest is 8% compounded annually. ANSWER: __________________________
Ted deposited​ $1750 in an RRSP on March​ 1, 2014, at​ 3% compounded quarterly. Subsequently the...
Ted deposited​ $1750 in an RRSP on March​ 1, 2014, at​ 3% compounded quarterly. Subsequently the interest rate was changed to​ 4% compounded monthly on September​ 1, 2016, and to​ 4.5% compounded​ semi-annually on June​ 1, 2018. What was the value of the RRSP deposit on December​ 1, 2020, if no further changes in interest were​ made?
Li Jun had a balance of $4,000 in his RRSP. In addition to this, he invested...
Li Jun had a balance of $4,000 in his RRSP. In addition to this, he invested $500 at the end of every 3 months for 8 years. His RRSP earned 4.00% compounded quarterly for the first 2 years and 4.85% compounded quarterly for the rest of the period. a. What is the accumulated value of the balance of $4,000 at the end of the time period? Round to the nearest cent b. What is the accumulated value of the annuity...
How much money will be in an account into which $500 per month is deposited for...
How much money will be in an account into which $500 per month is deposited for 8 years, if the interest rate is 6% compounded monthly?
1 Quita wants to invest $500 at the end of every month in a mutual fund....
1 Quita wants to invest $500 at the end of every month in a mutual fund. She will be receiving $35,000 at the end of 5 years. If the interest is compounded monthly, what is the annual rate of return earned on the investment? Group of answer choices 0.5% 5.0% 6.1% 5.9% 2 Lexi wants to purchase a new field tractor, which would cost $30,000. She has $6,000 to invest today in an account that pays 6% compounded annually. How...
Ali made equal deposits at the beginning of every 3 months into an RRSP. At the...
Ali made equal deposits at the beginning of every 3 months into an RRSP. At the end of 8 years, the fund had an accumulated value of $60,000. If the RRSP was earning 4.50% compounded monthly, what was the size of the quarterly deposits?
Harlan made equal payments at the end of each month into his RRSP. If interest in...
Harlan made equal payments at the end of each month into his RRSP. If interest in his account is 11.1% compounded semi-annually​, and the balance after eleven years is ​$14,000​, what is the size of the monthly ​payment? The size of the monthly payment is ​$nothing. ​(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as​ needed.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT